If anyone thinks that Ryozan's reasoning is... unreasonable, here is a breakdown of why I feel it's perfectly reasonable for him to come to the conclusions that he did. If you're not interested, I'll put it in a hider.

[hider=Logic Powah!]1.) Empire vs Rebels is the first thing on his mind, so much so that it is interfering with his swordsmanship. 

2.) He meets lady. First thing lady says to him is essentially, "Supporters of the Empire are liable to get stabbed 'round these parts..."

3.) Lady is in an apprehensive posture, ready to summon something at a moment's notice. A neutral citizen or an Empire supporter would have no reason to be so nervous. Considering his mental state, the likelihood that he would consider her a rebel is high.

4.) Ryozan regularly studies tactics, so he knows how rebellions work. Overt organizations are a no-go. Word of mouth spread through people who know and trust one another, ie friends, is the way to go.

5.) From 4, a friend of a rebel is then suspect of being a rebel due to the nature of how rebellions form. Suspect does not mean a conclusion is formed.

6.) Jovial guy openly expresses friendship with lady. Jovial guy is suspect.

7.) Jovial guy is acting perfectly normal, so he is not suspicious until...

8.) Lady [i]immediately[/i] follows jovial guy, tries to communicate with a [i]boistrous[/i] man [i]silently[/i] after she [i]openly[/i] spoke to him in the ramen stand in a manner that is [i]uncharacteristic[/i] of the discourse that typically takes place at such locations.

9.) Also, the streets are eerily empty.

10.) Also, one of the first thing ninjas learn is how to "see through deception."

Now is it really that much of a stretch for a ninja with Empire vs Rebels on his mind to come to the conclusion that the two people in question were rebels, all things considered?[/hider]